Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities

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Only 22 percent of first-time, full-time students at for-profit schools received their degree within six years, compared to 55 percent of similar students at public schools and 65 percent at private non-profit institutions, according to and Education Trust report based on data collected in 2008.

The heavy recruitment of low-income and minority students to for-profit colleges, where tuition is higher than at other institutions, saddles students with extra debt and fails to provide them with the kinds of post-graduation opportunities that the institutions advertise, according to this report.

With an astronomic increase in enrollment at for-profit institutions, up 236 percent from 1998 to 2008, the amount of federal grant money awarded to these colleges and universities has similarly increased. For-profit schools received less than a billion dollars in grant money for the 1998-99 school year; a decade later, that amount had increased to $4.31 billion.

This influx of aid has not been enough, however, to meet the average student’s needs. In 2007, students at four-year, for-profit institutions had an average unmet need of $24,957 – compared to less than a third of that amount ($8,588) at four-year public schools.

A majority of students (94 percent) at for-profits received a Stafford loan, with almost half of all students (46 percent) supported by private loans. Those figures are significantly higher than their public and non-profit counterparts, where 42 and 54 percent receive Stafford loans, and 14 and 25 percent receive private loans, respectively.

Student default rates are also higher than at other schools. The average bachelor degree recipient at a for-profit school was as much as $31,000 in debt upon graduation in the 2007-2008 academic year. As many as 19 percent of for-profit students default on their loans within three years of entering the repayment period.

The authors of the report argue that graduation rates at for-profit schools are also adversely affected by the aid differential.

Click here to read the report.